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Reverse charge to UK non-vat company

Application of EU-reverse charge to non-vat Uk company

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Hello,
I have a small company here in NL and provide marketing services to companies all around the world.

I need to invoice recurrently an UK company, which happens to be NON-VAT registered (I think it's part of a special regime from the uk that allows that). How do I handle VAT? Should I apply the "reverse charge" indication or just leave VAT emtpy  (only service amount, no vat included and no %)?

Do I have to pay VAT on my side in any way, or is there a limit of how much I can invoice to that entity in a year?

 

Replies (12)

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Caroline
By accountantccole
04th Aug 2020 09:35

It should be OK to invoice it as a reverse charge (no VAT charged)

https://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/wh...

The customer is still a taxable person even if they are not registered for VAT in the UK.

"The concept of a taxable person covers anyone who independently carries out an economic activity, even if that person is not identified for VAT purposes, but it also includes a non-taxable legal person identified for VAT purposes [Article 43 of the VAT Directive]."

As they don't have a VAT number, you don't need to declare on an EC sales list.
This seems to cause issues with some French accountants so make sure your Dutch accountant is happy!
Who knows from 1/1/21 .....

Thanks (1)
Replying to accountantccole:
Caroline
By accountantccole
04th Aug 2020 09:36

The volume of transactions is only an issue for the customer as they need to take the reverse charges into account when determining if they meet the VAT threshold in the UK

Thanks (1)
Replying to accountantccole:
blue sheep
By NH
04th Aug 2020 20:02

Not sure I agree with that, the purpose of vat across the EU is that the ultimate cost sits eventually with a consumer that is not VAT registered, therefore B2B is effectively vat neutral and can therefore be reverse charged, but B2B in vat parlance means vat reg to vat reg.
If a customer from another EU country cannot provide a VAT number how would the supplier then be able to provide a reverse charge supply?
When a customer receives a reverse charge supply they are required to declare that on their vat return and pay that output vat to hmrc albeit they can correspondingly claim back as input tax, however what mechanism is there for a non vat reg entity to pay the output?
I think you will find that you will have to charge NL VAT

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Replying to NH:
Psycho
By Wilson Philips
04th Aug 2020 20:28

Wrong wrong wrong

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Replying to Wilson Philips:
blue sheep
By NH
04th Aug 2020 20:33

Would you care to back that up with some legislation or some other structured argument rather than just the one word repeated 3 times!

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Replying to Wilson Philips:
blue sheep
By NH
04th Aug 2020 20:33

Would you care to back that up with some legislation or some other structured argument rather than just the one word repeated 3 times!

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Replying to NH:
Psycho
By Wilson Philips
04th Aug 2020 20:42

Well, to start with, from a UK customer’s perspective they need to take into account reverse charge supplies received when considering whether they need to register. If the customer had to be registered before receiving reverse charge supplies that would make the above nonsensical.

For the UK supplier they need to consider the place of supply rules. For a business customer (as defined above, which does not require a VAT registration) in another member state the general rule is that the place of supply is that member state and therefore outside the scope of UK VAT.

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Replying to Wilson Philips:
blue sheep
By NH
04th Aug 2020 20:59

I wasn't aware that I had suggested the uk customer was required to register, and I don't see that there is a uk supplier in the scenario however its been a very long day so I could well be missing your point, either way I think the point is that this is a question for a Dutch accountant not a uk forum.

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Replying to NH:
Psycho
By Wilson Philips
04th Aug 2020 21:16

You certainly appeared to be suggesting that, in whichever direction the supply is made, the customer needs to be registered otherwise domestic VAT needs to be charged.

“ If a customer from another EU country cannot provide a VAT number how would the supplier then be able to provide a reverse charge supply?”

Generally, that is not correct but I agree that Dutch VAT rules need to be considered.

You had asked for a reasoned argument, so that is what you got - the reference to a UK supplier being an example to illustrate the point that customer registration is not required in the case of a supply by a UK supplier - Dutch rules might be the same, they might not.

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Replying to Wilson Philips:
blue sheep
By NH
04th Aug 2020 21:26

In my experience of non UK EU countries they unanimously view B2B as being VAT Reg and B2C as being non VAT Reg, I suppose that was my point.
I have had a fair number of non vat reg clients say 'my Spanish supplier has refused to deal with me unless I give them my vat number' for example

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avatar
By Itadutch
04th Aug 2020 13:32

Thanks! I will check with my accountant on Friday, from what I see it seems like for Dutch rules non-vat entrepreneurs are considered as individuals so I would have to add VAT on my side, which would not be great!

I will keep you posted

Thanks (0)
Replying to Itadutch:
Psycho
By Wilson Philips
04th Aug 2020 20:32

It will depend on the Dutch VAT rules - as noted above, French VAT law appears to require the customer to be VAT-registered to allow the supplier to apply reverse charge rules. UK VAT law does not - requiring only that the customer is a business customer. You therefore need to establish whether Dutch VAT rules are aligned with France
or with UK.

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